Curaçao's economy will recover only partly in 2021, growing by 6.5%, after plummeting by an estimated 18.4% in 2020. Economic recovery in 2021 will break the chain of multi-year recessions that the island has been subject to since 2016, and will be the result of base effects and some resumption in tourism and related sectors. Tourism came to a standstill during the health crisis and will be slow to recover, acting as a drag on output, as pessimism towards travel and tourism will linger until 2022, when vaccines become widely available globally. Once tourism activity normalises (which is expected in 2022), GDP growth will accelerate substantially, to 11.5%.

Although we do not forecast components of real GDP, we expect a partial recovery in 2021-22 to be driven by consumption, aided by fiscal support measures, and an anticipated pick-up in tourist arrivals from the fourth quarter. On the investment front, we expect pandemic-related uncertainties to linger throughout the forecast period, causing businesses to delay investment projects further. No significant public investment projects are pencilled in for 2021, but activity restarting at the Isla oil refinery in 2022 poses upside risks to our growth forecast for that year. However, any revival in activity is expected only in late 2022, as the government is looking for an operator for the refinery, after its Brazilian partner, Roberto Viana, pulled out of the deal. Therefore, main-taining liquidity support from the Netherlands will be crucial in stimulating recovery in 2021-22.